Resum:

This thesis provides an empirical investigation of international capital flows and
how they affect financial markets and economic activity, with a focus on capital
flows from benchmarked investors. In the first chapter, I study different channels
through which well-known benchmark indexes impact financial markets across
countries. Exogenous, changes in benchmarks affect the asset allocation by international
mutual funds, and by doing so they impact capital flows, asset prices and
exchange rates. In the second chapter, I show that government access to foreign
credit increases private access to credit. I use a natural experiment that increased
the capital inflows by benchmarked investors to Colombia’s sovereign debt market.
Results show that after this event, commercial banks in Colombia reduced
their exposure to government debt, and increased credit to the private sector, suggesting
positive effects on the real economy. In the third chapter, I argue that
because of the way financial globalization is often measured, it has led to the
misperception that financial globalization in emerging markets has been growing
in recent years. Using alternative measures I find that, financial globalization has
grown only marginally and international portfolio diversification has been limited.